LDN - Business

Chip equipment maker ASML's suppliers eye Asia plants outside China amid tensions

[March 11, 2023] By Francesco Guarascio and Toby Sterling

HANOI/AMSTERDAM (Reuters) -Suppliers to Dutch chip-making machines giant ASML Holding NV are considering building plants in Southeast Asia instead of China amid political tensions between Beijing and the West, according to two sources and documents seen by Reuters.

Officials from a dozen tech companies are set to visit Vietnam, Malaysia and Singapore next week, according to a note from the Brabant Development Agency, a Dutch public body involved in organising the trip.

"The majority of the companies (are) joining because they are considering to expand/setup production locations in either Vietnam or Malaysia," said the note prepared by the agency together with Brainport Industries, which represents 200 high tech manufacturing companies based near the Dutch city of Eindhoven.

The possible investments are part of a wider, long-term strategy to reduce exposure to China, two people familiar with the plan told Reuters.

The dozen companies on the mission are almost all contractors to ASML, one of the world's top suppliers to semiconductor manufacturers such as TSMC , Samsung and Intel. Some have production facilities in China.

The Dutch government has never granted ASML a licence to sell its most advanced machines to customers in China, following pressure from Washington, which is seeking to hobble China's ability to make its own advanced computer chips and to slow down its military advances.

ASML's lithography systems can cost up to 160 million euros ($170 million) each and are used to create the circuitry of computer chips.

The Dutch government on Wednesday announced new restrictions

on exports impacting ASML's second-best range of chip-printing tools, which could lead to Chinese retaliation.

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Semiconductor chips are seen on a printed circuit board in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration/File Photo

SINGAPORE HEADQUARTERS?

Among the companies on the mission is Neways, which helps ASML develop electrical control units, power controls and wiring systems for lithography systems, according to the company's website.

A spokesperson for Neways declined comment.

ASML supplier NTS Group, which is a provider of precision mechanics tools, is another company that will join the business trip, Brainport said.

The other companies on the trip are Bestronics, AAE BV, BKB Precision, HQ Group, KMWE Group, Sempro, Sioux Technologies and VDL ETG, according to one of the documents and Brainport.

"VDL Groep has different branches in Asia ... We have no intention at all of leaving China," the company said in a statement.

Other companies could not be reached for comment on Friday.

Singapore is being considered as a potential location for regional headquarters, the note said.

ASML declined comment.

One person familiar with the organisation of the trip said one of the companies was in advanced talks with partners in Vietnam to build a factory.

A second company was also likely to invest there, the person said declining to name the firms and to be named because the information was confidential.

A second person involved in the organisation of the trip said that Malaysia was also a likely choice for new investment because some of the companies already have facilities there.

($1 = 0.9398 euros)

(Reporting by Francesco Guarascio in Hanoi and Toby Sterling in Amsterdam; Editing by Emelia Sithole-Matarise, Louise Heavens and Josie Kao)

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